Abstract:
The paper examines the effect of fiscal and monetary policies on economic activities in South
Africa while attempting to identify the role of uncertainty. The paper uses quarterly time series
data using the variables of income tax, consumption tax, capital tax, and government expenditure
to measure fiscal policy uncertainty while interest and inflation rate variables were used to measure
monetary policy uncertainty. Also, real gross domestic product, real consumption, real investment,
and employment were used to measure economic activities. The partial least squares structural
equation model (PLS-SEM) was used for analysis and result presented for measurement and
structural models. Results revealed the existence of policy uncertainty in the South African
economy which tends to reduce the level of economic activity as uncertainty increases. This result
informs of the need for policy makers to minimally reduce uncertainties for both fiscal and
monetary policies for the economy to improve.
